The United Kingdom has a heartbreaking start to the year. Aside from being forced to go on a lockdown for the third time, it has been reported that the UK economy decreased by 2.6% in November 2020 as the lockdown restrictions in England affected economic activity.
Although the recorded number was from last year, its effects will be greatly felt in the first quarter of 2021. The Office for National Statistics stated that the gross domestic product was 8.5% below its pre-coronavirus pandemic peak.
UK’s Economy Shrink by 2.6%
The decline in the economy in November 2020 came after six straight months of growth, with a recorded 0.6% improvement in October 2020. The services sector was the one who felt the blow, although some construction and manufacturing activity slightly improved.
The closure of businesses such as parlors, pubs, and hairdressers meant that the service sector contracted by 3.4%. The sector is now 9.9% below the level recorded back in February 2020, according to ONS.
UK Chancellor Rishi Sunak stated that the numbers showed “its clear things will get harder before they get better, and today’s figures highlight the scale of the challenge we face.”
However, Sunak said that the vaccine roll-out and the economic support measures they could use mean hope. “With this support, and the resilience and enterprise of the British people, we will get through this,” he said.
Darren Morgan, the NS director for economic statistics, stated that “The economy took a hit from restrictions put in place to contain the pandemic during November, with pubs and hairdressers seeing the biggest impact.”
“However, many businesses adjusted to the new working conditions during the pandemic, such as widespread use of click and collect as well as the move online.”
Morgan added: “Manufacturing and construction generally continued to operate, while schools also stayed open, meaning the impact on the economy was significantly smaller in November than during the first lockdown.”
“Car manufacturing, bolstered by demand from abroad, housebuilding and infrastructure grew and are now all above their pre-pandemic levels.”
Economist Rory Macqueen from the National Institute of Economic and Social Research stated that the figures confirm a significant shrink in the last three months of 2020 despite the lockdown in England back in November having a similar effect to the first.
According to the economic editor Faisal Islam’s analysis, the fall of the economy last year was considerable. Still, the numbers show businesses are slowly adapting to the challenging conditions, and they are now finding a way to continue transactions.
The hit was just a part of what happened in the first lockdown back in April 2020 and was mainly confined to the service sector, with gyms, pubs, parlors, and hairdressing in sharp decline.
Construction and manufacturing remained open. By November 2020, house building and car manufacturing were back above the level of output pre-pandemic.
Based on the trade figures, £7 billion increase in EU imports in the three months to November 2020 as traders stockpiled car parts, medicines, and other goods before the end of the Brexit transition time.